The North American Securities Administrators Association (NASAA), with support from various state and provincial securities regulators in Canada and the U.S., is pursuing more than 200 active investigations of initial coin offerings (ICOs) and crypto-related investment products.
The agency released a press release on Aug 28, 2018, saying that the ongoing investigations are a part of its flagship “Operation Cryptosweep.”
Operation Cryptosweep Targets Shady Practices in the Unregulated Crypto Space
Founded in 1919, NASAA touts itself as the oldest international agency dedicated to protecting investors from financial misconduct. The agency launched “Operation Cryptosweep” in April 2018 to crack down on fraudulent ICOs and crypto-centric businesses.
Since the beginning of May, Operation Cryptosweep has led to nearly 50 enforcement actions against several ICOs and cryptocurrencies found guilty of violating existing laws and regulations. In continuation of that effort, the agency has now zoomed in on more than 200 cases of potential crypto-related fraud.
According to NASAA President Joseph P. Borg, the agency started some of the enforcement investigations suspecting securities fraud. However, it soon discovered that many of the businesses under scrutiny were possibly violating multiple state and provincial security laws, including one that makes it mandatory for financial firms to register a product before offering it to investors.
Borg acknowledged that “not every ICO or cryptocurrency-related investment is a fraud.” However, he also pointed it out that investors and businesses dealing in the crypto space should be aware of the fact that their transactions may be subject to state and provincial laws.
The NASAA President added:
“Sponsors of these products should seek the advice of knowledgeable legal counsel to ensure they do not run afoul of the law. Furthermore, a strong culture of compliance should be in place before, not after, these products are marketed to investors.”
Borg advised investors against blindly trusting any ICO that claims to be exempt from existing securities laws and urged them to raise their concerns with appropriate authorities before investing their “hard-earned money” in crypto firms.
As for crypto-related investment products, he emphasized that they should be registered with an appropriate regulatory authority for a formal review. This, according to him, provides an added layer of security for investors. The NASAA President further urged investors to always carefully evaluate their investment plans as even fraudulent products can sometimes sneak through the regulatory process.
